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TMI Blog2023 (9) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... FERABLE DFIA NO.S 3011001800 DATED 22.02.2022, 3011001172 DATED 07.02.2022, 3011001775 DATED 11.02.2022 & 3011001785 DATED 15.2.2022 AGAINST EXPORT OF AGRICULTURAL TRACTORS THE IMPORTED GOODS LITHIUM ION CELL IS NOT MENTIONED IN THE DFIA AGAINST DESCRIPTION OF AUTHOMATIVE BATTERY. YOU HAVE NOT SHOWN WHETHER LITHIUM ION CELL IS ACTUALLY USED IN EXPORT GOODS AS MANDATED UNDER PARA 4.12(1) AND 4.12(11) OF FTP THE MATERIAL PERMISSTTED TO BE IMPORTED SHALL BE OF SPECIFIC NAMES/DESCRIPTION OR QUANTITY RESPECTIVELY AS THE MATERIAL USED IN EXPORT OF RESULTANT PRODUCT. FURTHER ITC(HS) NUMBER MENTIONED IN THE IS 85076000 DIFFERS FROM THE ITC(HS) MENTIONED IN THE DFIA AGAINST AUTOMOTIVE BATTERY WHICH IS 85071000.YOUR CLAIM FOR BCD EXEMPTION UNDER THE SAID TRASNFERABLE DFIA CANNOT BE EXTENDED. THE SAID B/E MAY BE ASSESSED ON MERIT. Query raised by 10xxxxxx Group:SA" 2. Aggrieved by, the above query raised by the Deputy Commissioner of Customs, Mundra, the appellant filed appeal on various grounds before Commissioner (Appeals), who vide his order dated 11.04.2023 rejected the same. Aggrieved by the said order, appellants have filed the present appeal. 2.1 Appellant during the course of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use in the export goods need not be proved, particularly when the importer is a transferee of the DFIA: a) Shalimar Precision Enterprises P. Ltd v CC-2022 (9) TMI 228- CESTAT NEW DELHI: In this case the DFIA was granted for import of Syntan (Synthetic Tanning Agent) against export of Leather goods and the imported goods were Melamine. The Hon'ble Tribunal held that it is evident from literature that Melamine finds use in leather goods as Syntan and is therefore covered by the DFIA and it is not necessary for the importer to establish that the Melamine was actually used in the export product, b) Shah Nanji Nagsi Exports P. Ltd v UOI- 2019 (4) TMI 146- BOMBAY HC: In this case the DFIA was granted for import of "Maize" against export of "Maize Starch Powder" and the imported goods were Pop Corn Maize. The Hon'ble High Court held that since DFIA is transferable there is no condition of "Actual Use". It was held that though Pop Corn was not actually used in the export of Maize Starch Powder, it can be used to manufacture Maize Starch powder since it also has starch contents like other varieties of maize. It was accordingly held that Pop Corn was covered by the DFIA an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer, vide query dated 10.03.2023, has proposed to deny claim for exemption on following grounds: 1. Lithium Ion Cell is not mentioned in the DFIA against the description of Automotive Battery. 2. ITC (HS) number mentioned in the Bill of Entry is 85076000 differs from the ITC (HS) number 85071000 mentioned in DFIA against Automotive Battery. 3. Appellant has not shown whether Lithium Ion Cell is actually used in Export Goods as mandated under Para 4.12 (i) and 4.12 (ii) of FTP, as the material permitted to be imported shall be of specific names/description or quantity respectively as the material used in export of resultant product. 5.5 In view of the above, the assessing officer had observed that the exemption under the transferable DFIA cannot be extended to the appellant. It is against this observation, the appellant is contesting in the present appeal. Therefore, the issue for determination before me in the present appeal is whether the appellant is eligible to claim benefit of exemption from payment of Basic Customs Duty (BCD) on Lithium Ion Cell imported by them under the DFIAS issued for export product 'Agricultural Tractors' or otherwise. 5.6 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Annexure -A to DFIA are different from the CTH mentioned in the BE" This view was upheld by Hon'ble Bombay High Court in case of USMS Saffron Co. Inc (supra) reported in 2016 (331) ELT 155. Therefore, merely because CTH was not mentioned or ITC (HS) is not matching so far description covers the goods imported. the benefit is available to the assessee." 5.8 I find that in the above decision, Hon'ble Tribunal, Ahmedabad has relied upon the judicial pronouncements made by Hon'ble High Court and a Tribunal. I also find that the SION declared by DGFT itself does not prescribe any CTH for the inputs. It merely gives the name/ description of the inputs that can be imported under the DFIA and the export goods. Therefore, I am of the considered view that the difference in CTH cannot be a criteria to deny the benefit of DFIA and the observation made by the assessing officer is not legally tenable. 5.9 The appellant have also submitted that product description mentioned in the DFIA under Sr. No. 2 is "Automotive Battery" is a specific term and therefore provisions of Para 4.12 (i) has no application. As per the relevant Para 4.12 of the FTP, "Whenever SION permits use o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a specific term and therefore, the provision of para 4.12(i) would not apply." 5.11 On perusal of the above, I find that Hon'ble High Court has observed that the imported goods namely "maize" can be construed as specific term and therefore, the provision of Para 4.12(i) would not apply. In the present case the description "Automotive Battery" is a generic term as discussed above, and therefore provisions of Para 4.12(i) would be applicable in the facts of the case. 5.12 Further, I have also perused the judgment of Hon'ble Tribunal in case of M/s Pace Ventures Pvt. Ltd. Vs. C.C., Ahmedabad, Final Order No. A/11615/2019 dated 30.08.2019, wherein the petitioner had imported Green Cardamom against the description "Relevant Food Additives' and "Flavouring agent"mentioned in the DFIA. The Hon'ble Tribunal had in this case held that clearance of Green Cardamom is eligible under DFIA licence. The relevant Para is reproduced as under: "7. We find that in licence there is no mention of name of specific items but it only mentioned relevant food additives for pickles FDI approved, therefore all those goods which are used as food additives for making pickles will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e description given a finding taken a view that it cannot be justified as how "Apple Juice Concentrate" would not be covered under the description "Relevant Fruit Juice/Pulp/Puree" when the fact that "Apple Juice Concentrate" can interalia be used in the manufacture of export product in DFIA(Sorted Confectionary and Biscuits). Therefore, taking the ratio of said judgment in the present case also the description of relevant Food Additives/ or Food Flavouring clearly covers the Green Cardamom, therefore, it cannot be said that only because the specific name of Green Cardamom is not mentioned, the benefit will not be given........." 5.14 Similarly in case of M/s VKC Nuts Vs. C.C. Jamnagar (Prev.), Final Order No. A/11365/2020 dated 08.12.2020, petitioner had imported Inshell Walnut and had sought clearance against three different generically described inputs namely, Fruit/flavour/Dietary fibre. Hon'ble Tribunal had observed that Inshell walnut can be used as fruit/flavour/ dietary fibre in manufacture of biscuits and therefore, allowed the benefit of DFAI to the appellant. The relevant para is reproduced hereunder: "17. The present case is on a better footing that the 'I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 4.12(1) would not apply. 23. Respondents would submit that the general norms would indicate that, the items which are imported should be used for manufacturing resultant exportable items. The object of the scheme is to be looked upon to understand whether there exist actual user condition. For this purpose, respondents attracted our attention to the "general notes for all export products groups". Note-1:- "1. The norms have been published in this book with a view to facilitate determination of the proportion of various inputs which can be used or are required in the manufacture of different resultant products. In many cases, the resultant products and the inputs required have been described in generic terms. The applicants shall therefore, ensure that the goods sought for import and actually imported are those. which are used/required in the export product. The items allowed for import in the licence shall be co-related with the description of the export product in the Shipping Bill by the exporter to be authenticated by Customs. For example, if the input allowed in the norms is 'relevant fabrics, only the specific types of fabric i.e. polyester or nylon etc. used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5.19 It is the contention of the appellant that the imported goods 'Lithium Ion Cell' are covered by the description of Automotive Battery". In support of their contention they have submitted that they have annexed a few technical references downloaded from the internet indicating that Lithium Ion cells are used as EV application battery. They have also submitted a printout of a technical opinion from Indian Institute of Technology, Kharagpur on EV Batteries. The relevant paragraph of the opinion is reproduced as under: "Automotive Batteries are of two types. The batteries of conventional automotive Internal Combustion Engine based vehicles are of Lead- Acid type and supply the auxiliaries when the engine is off. Electric or Hybrid Electric vehicles on the other hand use a battery that drives a motor for propulsion that produces part or whole of the propulsion torque when the vehicle runs [5]. This battery is sometimes of the Lead-acid type (as in many 3 wheelers) or of the Lithium-ion type (as in many 4 wheelers). Thus, it can be said that EV battery is covered by the description of Automotive Battery. However, both Lead-acid and Lithiumion batteries (LIBS) are als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctronics products only. Since the exemption under the DFIA against SION C969 is for Automotive battery, and the imported goods have uses in electronic product. I am of the considered view that the appellant is not entitled to claim exemption. Hon'ble Supreme Court in the case of M/s Dilip Kumar and Company Vs. Commissioner of Customs (Import), Mumbai [2018 (361) E.L.T. 577 (S.C.)] held that exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. In view of the above discussions, the appellant has failed to establish the use of goods imported by them, i.e. Lithium Ion Battery, as automotive battery." 2.6 He further emphasizes that exemption notification are required to be strictly construed and also in case of any ambiguity in language, the benefit must go to Revenue. He seeks support of matter reported in 2018 (361) ELT 577 (S.C) in C.C (Import) Mumbai Vs. Dilip Kumar & Company. 2.7 It is submitted that the issue is no longer res integra and the same are decided in favour of the appellants in identical cases by relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Unibourne Food Ingredients LLP Vs. Commissioner of Customs , Mundra reported 2022(381) ELT 810 (Tri- Ahd) the term 'Materials' used in Notification No. 19 of 2015 are "raw material, components, intermediates, consumables, catalysts and parts which are required for manufacture of resultant product " are identically worded notification as referred in the Hon'ble Supreme Court judgement . 2.11 It is submitted that the Technical Opinion dated 31.03.2023 of IIT, Kharagpur that EV batteries are typically made up of multiple rechargeable lithium-ion cells connected together to form battery pack. It is opined that Electric batteries (EV) are "Automotive Batteries' used in Buses/Cars etc are also capable of being used in Agricultural Tractors after suitable technical modification. 2.12 The technical opinion of IIT Kharagpur clearly supports the case of the appellant. This Tribunal in the case of VKC Nuts Pvt., Ltd., Vs. CC, Jamnagar vide Final Order No. A/11365/2020 dated 08.12.2020 has held that "Expert Technical Opinion given by technical qualified person from a reputed institute like IIT cannot be brushed aside unless such technical opinion is displaced by specific and cogent evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raders Pvt. Ltd., - 2019 (368) ELT 962 (Tri-Mumbai). * Final Order No. A/10255/2022 dated 17.03.2022 passed by the Hon'ble Appellate Tribunal (Ahmedabad) in the case of Unibourne Food Ingredients LLP Vs. Commissioner of Customs, Mundra. * Sachin Pandey Vs. UOI - 2020(371) ELT 34 (All.) . 2.17 It is submitted that the Hon'ble High Court (Allahabad) in the case of Sachin Pandey Vs. UOI , under Para 16, it was inter alia held that " We see no reason to take a different view to take away the benefits otherwise available under DFIA Scheme under the Foreign Trade Policy, whether 2009-14 or 2015- 20, merely satisfy the petitioner. According to us the aforesaid judgements of the Punjab & Haryana High Court and Bombay High Court still hold the field, so far as permitting duty-free imports under DFIA are concerned. The contention of the petitioner that duty free import of any goods under DFIA cannot be permitted unless each of the above mentioned 'three essential conditions' are satisfied, clearly runes counter to the above judgements which are binding on authorities. Neither the officers of the respondents can be proceeded against the following such binding precedents nor can the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validation in terms of provision of Para 2.20 of Hand Book as held by this Hon'ble Tribunal in the case of Pushpanjali Floriculture Ltd., Vs. Commissioner of Customs, Nhavasheva - 2015 (327) ELT 0077 (Tri-Mum). 3. Considered contrarian submissions made by both the parties. At the heart of the issue is the controversy emanating from Lithium Ion Cells not having been specifically used in export goods under paras 4.12 (i) (ii) of Foreign Trade Policy. Party had exported automotive batteries classifiable under Tariff Heading 85071000, as against Lithium Ion Cells being classified under Tariff Heading 85076000, being the import item. The party has relied upon various judgments, some of which were considered and distinguished by the Commissioner below. The party has relied upon such decisions to plead that issue is no more res integra and has been decided in their favour by Tribunal as well as various Hon'ble High Courts and they had also relied on technical opinion dated 31.03.2023 of an expert from IIT- Kharangpur that lithium batteries being imported by them were EV batteries, and therefore capable of being used in tractors. Also product literature form various websites was produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. A substantive benefit in any case cannot be denied on such ground, specially when it is known that EV tractors use various chip based and lithium based sub assemblies of electronics. Leaned Advocate for the appellant emphasised that under DFR Scheme there is no prescription of actual user condition nor is one to one co-relation between the product exported and the product imported is required, and this is the uniqueness of the scheme. It was also pointed out by the learned Advocate and we agree with the proposition that impugned Customs Notification No. 19/2015 was under challenge and that the Hon'ble Allahabad High Court in Sachine Pandey case (cited supra) upheld non-correlation as one the feature of the DFIA Scheme. 3.3 We further find that in various decisions reported by either side that it is the possibility of use of product against the product exported which has been considered, as criteria for permitting import of product. In Commissioner of Customs (export), Nhavasheva V/s. Sparkling Traders Pvt Ltd. as reported in 2019 (368) ELT 961 (Tri.-Mum) ascorbic acid having multiple applications in pharmaceutical formulation food product etc, was allowed as "corrosion inhibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can also be stated in the light of decision in M/s. Shalimar Precision Enterprises Pvt as reported in 2022 (9) TMI 228 (CEATAT-Del.), wherein consignment of melamine imported by the appellants was allowed duty free import against description of Syntan the term "syntan" referred to synthetic agent. The findings which are relevant for the purpose of the present dispute and are therefore reproduced below: "21. The undisputed facts are that the appellant had imported Melamine declaring it Melamine and claiming the benefit of exemption under DFIA licence which permitted import of "Syntan". The short question which arises is whether the Melamine is a Syntan or otherwise. The Proper Officer had cleared the consignment for home consumption accepting Melamine to be Syntan. Thereafter, DRI initiated investigations and felt that Melamine was not Syntan. During enquiries by DRI importers had pointed out to it the order of the Tribunal in Dimple Overseas Ltd. holding that Melamine was a Syntan. However, the Additional Director, DRI, felt that the order of the Tribunal was not correct and therefore proceed to issue the show cause notice. The show cause notice was based on an expert opinion by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used Melamine in manufacture of exported products. As has already been recorded in the show cause notice itself DGFT had clarified that the imported material need not have been used and it is sufficient if it is capable of being used in the manufacture of final products. In our considered view, neither the Additional Director DRI who issued the show cause notice, nor the adjudicating authority who confirmed the demand or the Commissioner (Appeals) have a jurisdiction to modify the scope of the licence when it is clarified by the licensing authority DGFT itself. So long as Melamine can be used as Syntan which appears to be true from the literature produce before us and also the decision of this Tribunal and Dimple Overseas Ltd. it qualifies as Syntan. 25. Even if it is presumed that for the sake of argument that all the technical literature is wrong and only the expert at CLRI is correct and Melamine cannot be used directly as Syntan, but it has first to be treated as formaldehyde to make a condensate with formaldehyde before being used, as held by the Supreme Court in G.C. Jain it would make no difference. It still qualifies as raw material and can be imported under the licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite notices by the Adjudicating Authority. In this case, the judgment of the Supreme Court in G.C. Jain has also been brought to our notice. 30. Further it has already been clarified that DGFT itself had clarified that the material need not have actually been used but so long as it is capable of being used in the manufacture of final products it clarifies under the licence. 31. To sum up, the lower authorities have confirmed the demand ignoring the order of this Tribunal in Dimple Overseas Ltd., ignoring all the technical literature which state that Melamine can be used directly for tanning leather, relying on the opinion of CLRI contrary to the published literature and without even allowing cross-examination of that expert, on the ground that Melamine was not used in the export products contrary to the DGFT's clarification that actual use does not matter and on the ground that the HSN codes of Syntan and Melamine were different although there is no stipulation of HSN in the licence and even contrary to the law laid down by Supreme Court in G.C. Jain that goods which are used even after same processing and not directly can be imported under the licence. 32. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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